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The richest people borrow against their stock (2021)

forbes.com

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Re: The richest people borrow against their stock (2021)

#201

Post by technothrasher »

hn_throwaway_99 wrote: post #35
doe_eyes wrote: post #2

By borrowing against their holdings. The framing is deceptive. You can do this too: there is no requirement to have billions in collateral. If you own stocks, your brokerage will lend you money at a very low rate, secured by the equity - typically up to about half of your stocks' worth. The gotcha is market risk. If there's another crash akin to the housing crisis - and there will be - the bank will liquidate your ho…

I disagree the framing is deceptive. A big reason this is done is to avoid paying taxes altogether - borrow against your equity, and then when you die your heirs receive a step-up in basis, so the gains are never taxed. To make it worth while you need to have a crap ton of money, such that the interest on your loans is less than the estate taxes you'd pay. Only very, very rich people pay any estate taxes in the first…

> Only very, very rich people pay any estate taxes in the first place because a couple's estate tax exemption is currently over $27 million.

That's federal estate tax. State tax can be different. Massachusetts, for example, has estate taxes on over $2M ($4M for a couple who manages their estate plan wisely).

Re: The richest people borrow against their stock (2021)

#202

Post by christophilus »

creer wrote: post #87
doe_eyes wrote: post #2

By borrowing against their holdings. The framing is deceptive. You can do this too: there is no requirement to have billions in collateral. If you own stocks, your brokerage will lend you money at a very low rate, secured by the equity - typically up to about half of your stocks' worth. The gotcha is market risk. If there's another crash akin to the housing crisis - and there will be - the bank will liquidate your ho…

Your brokerage will likely lend you money but you will be disappointed by the rate. It is not "very low". Not even "low". At least not where we are now in the interest rates cycle.

Interactive Brokers is 6%. Not low, but not bad.

Re: The richest people borrow against their stock (2021)

#203

Post by carlosjobim »

Shaanie wrote: post #149
hackernewds wrote: post #140

Earlier quoted context omitted.

transfer the basis to whom? better not inherit anything

If I buy something for $10 and it's worth $10,000 when you inherit it, you should (obviously?) be taxed on the increase in value from $10 -> $10,000 if/when you sell. The purchase price shouldn't be "reset" to $10k. It'sutterly insane to me that the step-up basis exists in the US, it's such an obvious loophole that can fairly easily be closed without many adverse effects. In my country (Sweden) if you don't know the…

> It's utterly insane to me that the step-up basis exists in the US, it's such an obvious loophole that can fairly easily be closed without many adverse effects.

Who do you think writes the laws and the tax code?

Re: The richest people borrow against their stock (2021)

#204

Post by CPLX »

nobodywillobsrv wrote: post #165
hn_throwaway_99 wrote: post #35

Earlier quoted context omitted.

I disagree the framing is deceptive. A big reason this is done is to avoid paying taxes altogether - borrow against your equity, and then when you die your heirs receive a step-up in basis, so the gains are never taxed. To make it worth while you need to have a crap ton of money, such that the interest on your loans is less than the estate taxes you'd pay. Only very, very rich people pay any estate taxes in the first…

Yes but that is because taxes are incoherent and abhorrent Why do we tax realized capital gains at all and why based on the ruler of fiat which is controlled by those who tax (they keep making the ruler shorter) If the goal is to creat drag on multiplicative dynamics then do so coherently Tax should make sense at least in core targets. Yet there are no core targets.

Because realized capital gains are income and we tax income.

Re: The richest people borrow against their stock (2021)

#205

Post by mherrmann »

WA wrote: post #179
refurb wrote: post #159

Earlier quoted context omitted.

Bezos has paid $1.5B and Musk over $12B in taxes according to Google.

Please stop counting taxes of super-rich in absolute terms. It simply doesn't matter. We need percentage-based taxes to get the real picture. Because those numbers seems a rounding error given their wealth.

I think it does matter. Let's assume Musk paid $12B. How much have you paid? Isn't it then actually reasonable to say that he contributed more than you to the country, even if his tax percentage is lower than yours?

Re: The richest people borrow against their stock (2021)

#206

Post by mcculley »

mschuster91 wrote: post #191
koolba wrote: post #183

Earlier quoted context omitted.

> If I buy something for $10 and it's worth $10,000 when you inherit it, you should (obviously?) be taxed on the increase in value from $10 -> $10,000 if/when you sell. The purchase price shouldn't be "reset" to $10k. There’s nothing “obvious” about tax policy. It’s an arbitrary determination of what’s in and what’s out. Taxing capital gains at all is not “obvious”. Taxing transfers of assets to your children, whethe…

> The same law is the one that lets the surviving spouse or children to continue to live in a home rather than be forced to sell due to a sudden realized capital gain. You can argue that you don’t care about keeping multi millionaires in their childhood homes after their parents die, but it’s hardly “obvious” that it should be taxed. Well, "homestead" exemptions are usually already a thing in most countries' inherita…

Most parents don’t want meritocracy. They want their children to have an advantage over the children of others. They just have not squared this instinct with political ideology.

Re: The richest people borrow against their stock (2021)

#207

Post by dranudin »

SomeHacker44 wrote: post #196
doe_eyes wrote: post #2

By borrowing against their holdings. The framing is deceptive. You can do this too: there is no requirement to have billions in collateral. If you own stocks, your brokerage will lend you money at a very low rate, secured by the equity - typically up to about half of your stocks' worth. The gotcha is market risk. If there's another crash akin to the housing crisis - and there will be - the bank will liquidate your ho…

This is not true: "very low rate." My brokerage starts at 12+% which I would not call low. It never even reaches prime at millions of borrowing, and I do not have remotely enough to get much better a rate.

You can also lend money from the options market with a box spread for around 4-5%. See e.g. boxtrades.com

Re: The richest people borrow against their stock (2021)

#208

Post by RickJWagner »

bruce511 wrote: post #114
Apreche wrote: post #92

Earlier quoted context omitted.

There is another difference that is related to risk. Larger loans allow access to lower risk opportunities. If I had many millions in stocks, and I was greedy for more, I would borrow against it to develop residential real estate in a high rent neighborhood. Yes, there's some risk, but it's as close as you can get to buying a money fountain. I'd be very confident that the rents from the building would pay back the mo…

I've owned property to rent in the past. I feel it's worth pointing out to folks keen on this route that, while profitable, it's a Lot of work. Owning stocks is zero effort. You might glance at your results from time to time. Your fund manager does the heavy lifting (and gets a small % fee for it.) Owning a property is a pretty constant stream of work. Organizing maintainence. Dealing with complaints. Occasionally ev…

I had a friend that bought a second house as a rental.

One day he described what happened when his renter left. They had money troubles, so they quit paying bills (including the rent). When they were evicted, he found that they had been throwing their garbage down the stairs into the basement so they didn't have to pay the trash service. The stench was unbearable, and the mess horrendous.

It is not easy money to be a landlord, I figured.

Re: The richest people borrow against their stock (2021)

#209

Post by carlosjobim »

rijoja wrote: post #185
chgs wrote: post #170

Earlier quoted context omitted.

> in many cases this can't be paid without selling the asset. Ok. And? Why should someone get $5m for doing bugger all. If they were paid $5m for cleaning a car they would lose a fortune in tax.

idk, maybe because their parents liked them? Do you really want to incentivize against people working hard to make sure their offspring, has a good life? Also a family-home might have sentimental value, and this really doesn't only apply to rich people, quite the contrary actually.

> Do you really want to incentivize against people working hard...

You mean by taxing labour and taxing commerce?

Sorry for the snark, but come on...

The Roman empire was built on never taxing labour, because that was seen as an atrocity (never mind the slavery). Instead they taxed luxury goods and debased their currency. The United States was built on never taxing labour, because that was seen as an atrocity (never mind the slavery). Instead they taxed importations and debased their currency.

Since all land was created by God and everything else was created by people's labour, the really unjust thing is to tax labour instead of taxing land. But "territory" is an instinct so deeply ingrained that it's probably been with us for millions of years. However, which other mammals allow members of the same species living on their territory which are not family? As in renting.

Re: The richest people borrow against their stock (2021)

#210

Post by piyuv »

mherrmann wrote: post #205
WA wrote: post #179

Earlier quoted context omitted.

Please stop counting taxes of super-rich in absolute terms. It simply doesn't matter. We need percentage-based taxes to get the real picture. Because those numbers seems a rounding error given their wealth.

I think it does matter. Let's assume Musk paid $12B. How much have you paid? Isn't it then actually reasonable to say that he contributed more than you to the country, even if his tax percentage is lower than yours?

How much subsidy did he get for his companies? Trump said Musk wouldn’t survive without those. I don’t think Musk would say Trump is a liar.

https://truthsocial.com/@realDonaldTrump/posts/1086367432957...

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