The richest people borrow against their stock (2021) • Hacker News Board

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

#291

Post by 0xBDB » Wed, Oct 16, 2024, 7:00 PM UTC

JumpCrisscross wrote: post #88

bdangubic wrote: post #71

Earlier quoted context omitted.

The fact is though if you live in America are paying property taxes on your home, you are NOT hiding from the IRS the fact that you do - you are not saying "sorry, I don't really own this home and I won't be paying anything to you until such later time when my ownership will be revealed at the grand sale at which point I'll pay some taxes" With "unrealized" stock gains you are doing just that - hiding ownership so yo…

> if you live in America are paying property taxes on your home I own in Wyoming. My property's assessed value is like 1/10th the market rate. My neighbour--just checked!--who owns a property like ten times my size, across two plots, and far more lavish than my own has an assessed value similar to mine. The real estate records even have a line item for "actual value" separate from assessed value. Not familiar with th…

This is most states, because the increases are capped for existing property owners especially for first homes - the homestead exemption. If you own a house you live in for a long time in a hot market your assessed value can be very low relative to market.

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

#292

Post by creer » Wed, Oct 16, 2024, 7:00 PM UTC

UltraSane wrote: post #131

kumarvvr wrote: post #111

I borrow against my measly investment portfolio through my local banks "Loan against Securities" account. Interest rate is about 10%. My father was using this feature for past 15 or so years from same bank. We are solidly middle class in India. The only difference between what we do and what rich folk get is probably lower interest rates and higher percentage of loans against the securities value.

10% seem very high for a that kind of loan.

Just about right for a different country than the US. Mortgage rates in India 8.3-9.5% right now, inflation 5-6%, benchmark rate 6.5% - and this may or may not be tax deductible in India, perhaps depending on the usage. And 25-44% yoy stock market gains. It's about the same as a 15-year fixed rate mortgage - same as in the US.

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

#293

Post by 8note » Wed, Oct 16, 2024, 7:03 PM UTC

koolba wrote: post #183

Shaanie wrote: post #149

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. 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…

> 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…

I think you've misunderstood what they're suggesting - they're considering the transfer from parent to child to not be a realization, so there's no taxes, and no change in basis.

The child who sells the house, then has to pay gains from when the house was first purchase, rather than against the value when they inherited it

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

#294

Post by [deleted] » Wed, Oct 16, 2024, 7:03 PM UTC

ywvcbk wrote: post #143

jjav wrote: post #117

Earlier quoted context omitted.

> your brokerage will lend you money at a very low rate, secured by the equity I have not found one that will offer a very low rate, have you? For example here are Schwab's rates for a loan against equity: https://www.schwab.com/pledged-asset-line/rates For 500K-1M rate is SOFR + 3.4%, so about 8.2% For multimillionaires it gets better at SOFT + 2.4%, or about 7.2% Not bad in this market but not one I'd call " very l…

Switch to a different broker? e.g. it’s just +0.5% https://www.interactivebrokers.com/en/trading/margin-rates.p...

[deleted]

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

#295

Post by 8note » Wed, Oct 16, 2024, 7:08 PM UTC

caeril wrote: post #288

vel0city wrote: post #228

Earlier quoted context omitted.

But like, why? It's a worthless point. If there were five taxes of one percent each versus one tax of 20% how is the one tax somehow better? Which one would you choose, getting taxed five times or once? It doesn't really matter that there's a FICA and an income tax and a payroll tax in the end, what really matters is the overall tax rate and if that's fair given some moral decision of fairness of sharing costs of soc…

> how is the one tax somehow better? Local and state taxes generally actually help you. Your local infrastructure is maintained, and your kids go to schools funded by your taxes. Federal taxes, however, are largely transfer payments from the productive to the unproductive, as well as funding wars in areas that have absolutely nothing to do with you. It's pretty easy to make the distinction between "good" and "bad" ta…

I'm generally helped by my federal taxes going to help feed students in poor areas. Both from a feel good standpoint and that those students have a better chance at becoming more productive, which means they can buy stuff from me.

I also benefit from those foreign wars because they keep the US empire of cheap shipping open, so I can buy stuff for cheap from countries who've specialized in manufacturing

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

#296

Post by vel0city » Wed, Oct 16, 2024, 7:11 PM UTC

scotty79 wrote: post #287

vel0city wrote: post #262

Earlier quoted context omitted.

> Taxing spending would also help with vast empires that cosist of inherited money Or we just finally actually tax inherited wealth like other kinds of income instead of giving wealthy many many millions of handouts and tax subsidies. > with no loopholes We've both shared examples of lots of ways one can have loopholes on spending money. If the standard is to find a way of "no loopholes", well, spending money outside…

> spending money outside of the tax jurisdiction away from the knowledge of the tax jurisdiction is a loophole. Yeah, but how? How do you carry it or send it across the border? Cash? Gold? Good luck with that. You'd basically have to set up a smuggling operation for cash like people now do for drugs. With the risk of cash going missing and every step of the road. Becasue it's not hot and whoever steals it can use it…

> I expect their bank to to report they made a transfer abroad and deduct spending tax automatically

So we're not taxing spending, we're taxing bank transfers as well. Maybe they just put it in a savings account overseas. Maybe they're paying off a loan for money sitting elsewhere. Who says it was a sale? Prove they bought something.

>> Having poorer people pay more effective tax rates than wealthier people doesn't strike me as fair.

> That's not at all what I'm advocating for.

But that is what you're advocating for, by pushing it to just an extremely complicated sales tax and complicated system of fractically more complicated credits for exports and subsidies for the poor to hopefully reduce their tax burdern and what not. Inherently the wealthy will spend a smaller percentage of their income. The wealthiest practically can't spend it as fast as they get it even flying private jets around the world, but tons of middle-class people seem to barely have anything in savings. You just keep ignoring it and offering half measures to address it.

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

#297

Post by rijoja » Wed, Oct 16, 2024, 7:12 PM UTC

carlosjobim wrote: post #209

rijoja wrote: post #185

Earlier quoted context omitted.

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…

> 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.

Interesting, even though I don't see if you are for or against taxing labour, commerce or inheritance.

Inheritance tax is a way for the establishment to take land from small landowners. The state isn't a good counterbalance to "greedy" corporations, the state is there to support big business.

> It'll be sold to a mega-corp because they have more money to spend. So in a couple generations you kill off areas that are primarily small farms.

Please see Bruce511's comment above, he explains it better than me.

The thing is that with an inheritance tax, you make it impossible for someone to live with little or no money, and caring for their off-spring, by giving them a place to stay.

> Since all land was created by God...

Aha, but in the commandments it says that you shouldn't steal, so having property doesn't seem to be forbidden?

> But "territory" is an instinct so deeply ingrained that it's probably been with us for millions of years

So, is caring for your off-spring, kindness and brotherhood. What is your point?

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

#298

Post by 0xBDB » Wed, Oct 16, 2024, 7:13 PM UTC

bdangubic wrote: post #69

pwg wrote: post #57

Earlier quoted context omitted.

> Can you sell your house back and forth to your spouse every year to multiply the exemption? If you try you'll likely find yourself being charged with tax evasion once the IRS recognizes what you are doing.

> If you try you'll likely find yourself being charged with tax evasion once the IRS recognizes what you are doing. Under what law exactly would this "tax evasion" charge be filled (I.MAKE.S.UP(b)(ii)? :)

https://www.wipfli.com/insights/articles/110727-tax-conseque...

"In addition, a special punitive rule applies to convert gain otherwise taxable as capital gain to ordinary income. If the property sold or exchanged (a liquidation is treated as a sale) between related parties is depreciable by the buyer (regardless of whether the property was depreciable by the seller), § 1239 requires any gain recognized on the sale or exchange to be treated as ordinary income."

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

#299

Post by atmavatar » Wed, Oct 16, 2024, 7:21 PM UTC

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…

Borrowing against the current value of your stocks should automatically cause any gains to become realized for tax purposes.

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

#300

Post by creer » Wed, Oct 16, 2024, 7:31 PM UTC

kumarvvr wrote: post #111

I borrow against my measly investment portfolio through my local banks "Loan against Securities" account. Interest rate is about 10%. My father was using this feature for past 15 or so years from same bank. We are solidly middle class in India. The only difference between what we do and what rich folk get is probably lower interest rates and higher percentage of loans against the securities value.

How is this used by the middle class in India? To fund day to day living expenses? to buy or build a house? for further investment? Do people tend to repay the debt now and then, or make it flow into their estate? how does succession / estate law treat that? Is this seen as prudent management? etc...

I know these ways of thinking are very different between the US and western Europe (where for example a home mortgage is very cheap, and considered normal and indispensable investing, and stock investing can be crazy conservative - all the way to considered reckless, and estate law and tax is downright brutal). I wonder about India.