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

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

#341

Post by mikeyouse » Fri, Oct 18, 2024, 5:10 PM UTC

Panzer04 wrote: post #106

PaulDavisThe1st wrote: post #94

Earlier quoted context omitted.

This is because for a long time, the USA does not tax assets other than real estate. Our tax system is structured around the fundamental idea of taxation occuring on transactions, whether that's income in exchange for labor, income resulting from the sale on (non-real-property) assets etc. I'm not sure if this is a good thing (it might be, it might not) but it's the way it is.

It's mostly practical, I think. Not all assets can be valued, or are liquid. Once a transaction occurs though you have both a price to tax on and the money to pay the tax.

It’s awfully convenient that this ambiguity in asset prices leads to a massive an unprecedented tax break to the richest people in the country — many of whom are literal experts in valuation.

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

#342

Post by deepsun » Fri, Oct 18, 2024, 8:42 PM UTC

creer wrote: post #279

deepsun wrote: post #103

Earlier quoted context omitted.

Not postpone -- avoid. The base price of the asset is adjusted at the time of your death, so if bank sells the asset immediately, they pay no taxes. https://www.reddit.com/r/BuyBorrowDieExplained/comments/1f26...

There is confusion between capital gains tax and estate tax (and estate planning devices like trust law). And that matters. Is the problem capital gains tax as some people claim or is it elsewhere? In the process described, capital gains tax is not even postponed (and that write up does not provide for Peter's major expenses during life). That write up works (when it does) because of bypassing estate tax. The need fo…

Yep. The link above says:

> The conventional wisdom is that you can avoid income tax (via the basis adjustment at death) or you can avoid estate tax (via lifetime gifting and estate freezing strategies) but you can’t do both. This conventional wisdom is wrong, and I’ll explain why below.

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

#343

Post by chgs » Fri, Oct 18, 2024, 10:49 PM UTC

JumpCrisscross wrote: post #238

vel0city wrote: post #217

Earlier quoted context omitted.

So much stuff has several layers of taxes on it but "double taxation" is really only used when discussing inheritance taxes. It's a term wealthy people made up to trick poor people into feeling sorry for ultra wealthy actually paying taxes on things.

> "double taxation" is really only used when discussing inheritance taxes It’s a common concept, e.g. in the double taxation of corporate earnings and dividends.

But not when you pay income tax and then buy something and pay sales tax.

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

#344

Post by attentive » Sat, Oct 19, 2024, 2:34 AM UTC

cryptonector wrote: post #237

attentive wrote: post #153

Earlier quoted context omitted.

Pay taxes once vs pay interest forever? At what point it'll break even and go negative?

Let's say you're worth $100bn. You don't need to spend $1bn a year, just even a few tens of $ millions will be plenty, so you're borrowing a minute portion of your net worth. And your stocks will be going up in value, typically, so... you'll never run out of money. Plus you'll be a great customer for the banks that lend you money, so you'll get preferential interest rates. You'll never run out of money. You'll die an…

So, same as never selling your stock?

None of that matters. What matters, is if interests paid is more than taxes paid. Which at some point it will be. And at some point both loans and interests will be paid in full. Because its secured by stocks. And assuming there is no other assets, it'll be stocks sold and capital gain taxes paid.

Unless the argument here is that lender will be fleeced due to borrower's death. Which, if correct assumption, is fucked up.

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

#345

Post by gnepon » Tue, Oct 22, 2024, 6:01 AM UTC

listenallyall wrote: post #335

gnepon wrote: post #326

Earlier quoted context omitted.

This is the kind of extreme internet Libertarianism that's dangerous in the real world. Not practical or concerned with extreme poverty through inequality, but preferring to fight on first principles, like all tax being theft (not your claim, but equatable). I'm less concerned about the definition of fairness and more concerned about real human suffering.

> more concerned about real human suffering. Then your priorities are misdirected. The US Govt grabbing a few extra percent of billionaires' income would not reduce human suffering in any way. If anything, the ultra-rich have been far more effective than governments at improving impoverished human lives by setting up charities and using them to directly send money to poor regions around the world, enabling clean wate…

Yet the countries with the least amount of poverty (Northern Europe) have high taxes, a large welfare state and high redistribution

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

#346

Post by gnepon » Tue, Oct 22, 2024, 7:27 AM UTC

refurb wrote: post #338

gnepon wrote: post #326

Earlier quoted context omitted.

This is the kind of extreme internet Libertarianism that's dangerous in the real world. Not practical or concerned with extreme poverty through inequality, but preferring to fight on first principles, like all tax being theft (not your claim, but equatable). I'm less concerned about the definition of fairness and more concerned about real human suffering.

> This is the kind of extreme internet Libertarianism that's dangerous in the real world. Saying there is no objective definition of fairness and then calling out the unfairness in your idea is "extreme internet Libertarianism"? No, it's just common sense.

I was referring to their rejection of the progressive tax system. I can concede there's no objective definition.

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

#347

Post by listenallyall » Tue, Oct 22, 2024, 7:27 PM UTC

gnepon wrote: post #345

listenallyall wrote: post #335

Earlier quoted context omitted.

> more concerned about real human suffering. Then your priorities are misdirected. The US Govt grabbing a few extra percent of billionaires' income would not reduce human suffering in any way. If anything, the ultra-rich have been far more effective than governments at improving impoverished human lives by setting up charities and using them to directly send money to poor regions around the world, enabling clean wate…

Yet the countries with the least amount of poverty (Northern Europe) have high taxes, a large welfare state and high redistribution

The US Govt, unlike any other country, has the ability to print unlimited amounts of the world's reference currency. It also has no effective cap on its annual deficit or total debt. In other words, anything that the US Govt chooses to spend money on, it already can, with little oversight and no limits. That's why collecting additional revenue from billionaires, or any other source, has no effect whatsoever on how that govt spends (or "redistributes") money. US Govt's priorities are military, social security (which actually does keep many older people out of poverty), healthcare, and paying interest on its debt. You'll need to change the core priorities (including reducing deficit & debt) before collecting more money actually goes towards the goals you're seeking.

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

#348

Post by throwaway2037 » Wed, Oct 23, 2024, 2:12 AM UTC

bruce511 wrote: post #125

throwaway2037 wrote: post #118

Earlier quoted context omitted.

I agree with most of your comments. However, most tax authorities in highly advanced countries view income earned from rental property as passive income, regardless of how much work you need to do. This might be some minor deductions if you act as a real estate agent, but that is a lot of work in most jurisdictions, as real estate agency is normally a highly regulated area of work.

For many reasons, including tax and liability, any serious property owner will have a company structure to own the building, collect rent, pay bills etc. Doing it in your personal capacity is pretty insane. So yeah, you have all the paperwork to run the business as well.

"[S]erious property owner" -- This phrase sounds like a "no true Scotsman" test. What exactly qualifies as "serious"? I know numerous people who own a bunch of properties and don't have a separate company structure, as there is no tax advantage (in my jurisdiction). They use local real estate agents to find new renters when old renters leave. It's pretty simple. And, the agent also coordinates monthly payments (to the owner) and any repairs.