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The article is fairly thorough on this point. Among the available strategies is taking out loans against your shares, as ProPublica asserts Ellison and Musk hav
by ISL 5y ago
The article is fairly thorough on this point. Among the available strategies is taking out loans against your shares, as ProPublica asserts Ellison and Musk have done.
I'm surprised at the extent to which some people appear to have mortgaged their shares. Musk, in particular. The article suggests that he has placed ~$57B of his shares out of a (net worth of ~$151B) as collateral. If TSLA begins to fall, he may face one heck of a margin-call.
You'll still have to pay at some point (basis step-up aside), but the bill can be deferred or, in the case of a decrease in share value, perhaps avoided to some extent.
- tetromino_ 5y agoI still don't understand the scheme here. If you take out a loan against your shares, won't you have to pay back the loan (plus interest), which would still require you to eventually sell your shares and pay tax on capital gains?
- kypro 5y agoYes, but assuming your shares continue to appreciate at a faster rate than the interest you can defer any tax payments so far into the future that the amount becomes more and more insignificant due to economic inflation and capital appreciation. You're right that you still have to pay the tax, but you pay it on far more favourable terms than the average person. Of course the flip side of this is that the price of your shares collapse, but typically these secured loans are a fraction of an individuals net-worth and the risk is very low. Edit: I should add you can also time when you're taxed. So for example if taxes in the present are high you can wait then realise any profits when they're lower.