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There are some loopholes that should be closed however. You can go to a bank and borrow against your shares, using them as an asset without realizing capital g
by jcampbell1 6y ago
There are some loopholes that should be closed however. You can go to a bank and borrow against your shares, using them as an asset without realizing capital gains. In my mind, if you use the shares (gains) as collateral for your benefit, you should have to recognize the capital gains as mark-to-market immediately payable.
- ISL 6y agoPresumably the bank won't accept them as collateral for more than can be realized at the time of sale? I'm no expert, but I would guess that, if shares are foreclosed upon, the bank's basis is zero (and their taxation short-term)? (Edit: the downside here is that the government doesn't see any revenue from this approach, which it might otherwise. The shareholder must pay interest, though, which might not be to their advantage.)
- beerandt 6y agoA loan is not (usually) taxable income. Taxable income is used to pay back the loan. This keeps people's capital invested longer term, which is part of the purpose of capital gains tax incentives. In other words, it's not a loophole. It's working as intended.