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It's even worse than you describe. For the part he doesn't sell, no taxes are owed on the capital gains. Only when capital gains are realised, are taxes owed. I
by pg314 9y ago
It's even worse than you describe. For the part he doesn't sell, no taxes are owed on the capital gains. Only when capital gains are realised, are taxes owed. If he holds onto that stock forever he can keep compounding forever, without every being taxed.
- xienze 9y agoWell you also can't spend paper gains, you have to sell and therefore pay taxes. And you could, you know, lose money in the stock market.
- dude01 9y agoNot always true about paying taxes - inherited assets are "bullet-vested" to the time of inheritance, with taxes only on increase in value after death.
- pg314 9y ago> Well you also can't spend paper gains, you have to sell and therefore pay taxes. Wealthy people don't have to spend their capital. They have enough income through e.g. dividends. E.g. Warren Buffett bought (through Berkshire Hathaway) Coca-Cola in 1989, and has never sold a single share. He has indicated he plans to keep holding on to them forever. Hence, he will never pay taxes on the capital gains. > And you could, you know, lose money in the stock market. That is true. But how is that relevant?