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> The big takeaway I got from the article missing in your summary is that the wealthy take loans secured by unrealized gains in order to finance their lifestyl

by eloff 5y ago

> The big takeaway I got from the article missing in your summary is that the wealthy take loans secured by unrealized gains in order to finance their lifestyle. Which they have to pay back with post tax money. I don't see a problem here. At best this is tax deferral until capital gains are realized, something we allow for good reason - paying real money to cover tax on paper gains (which could vanish) is a problem, and could even force you into giving away an illiquid asset because you can't afford the tax on it. They're gambling their stock will perform better than the interest rate on the loan. That's a reasonable gamble. Taxing a loan seems silly.

robotresearcher 5y ago
> Which they have to pay back with post tax money Unless they die first. If heirs hold on to inherited property for a while (2 years?) they can sell it at the cost basis reset to the value at the time they inherited. They pay back the loan with the before-death gains untaxed. The original buyer got to effectively realize their gains via loans, untaxed. https://smartasset.com/taxes/how-to-avoid-paying-capital-gains-tax-on-inherited-property https://smartasset.com/taxes/how-to-avoid-paying-capital-gai...
- eloff 5y ago
  Sounds like a problem with how inheritance is taxed, not loans.
JAlexoid 5y ago
Actually it's a feature that rich people get. We bought a house last year and I was forced by QuickenLoans to liquidate my Tesla positions, that appreciated 5x and incurred short term capital gains. Were I richer, I could have avoided liquidating my long positions and pay proportionally less in taxes. The most annoying part is that in the end they didn't even need all of my stock portfolio liquidated, only about 30% to cover closing costs. Yet I got hit by a 5 figure tax bill because of it. In short - the system literally setup to extract as much as possible out of everyone, other than the wealthiest/most powerful. And that includes banks, government and lenders.

by eloff 5y ago

robotresearcher 5y ago

> Which they have to pay back with post tax money Unless they die first. If heirs hold on to inherited property for a while (2 years?) they can sell it at the cost basis reset to the value at the time they inherited. They pay back the loan with the before-death gains untaxed. The original buyer got to effectively realize their gains via loans, untaxed. https://smartasset.com/taxes/how-to-avoid-paying-capital-gains-tax-on-inherited-property https://smartasset.com/taxes/how-to-avoid-paying-capital-gai...

eloff 5y ago
Sounds like a problem with how inheritance is taxed, not loans.

JAlexoid 5y ago

Actually it's a feature that rich people get. We bought a house last year and I was forced by QuickenLoans to liquidate my Tesla positions, that appreciated 5x and incurred short term capital gains. Were I richer, I could have avoided liquidating my long positions and pay proportionally less in taxes. The most annoying part is that in the end they didn't even need all of my stock portfolio liquidated, only about 30% to cover closing costs. Yet I got hit by a 5 figure tax bill because of it. In short - the system literally setup to extract as much as possible out of everyone, other than the wealthiest/most powerful. And that includes banks, government and lenders.