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How do they afford lavish personal lifestyle if they're declaring no income (I get the cap gains part, I don't get the mansions, parties, cars, food etc. Bit)
by maxrev17 5y ago
How do they afford lavish personal lifestyle if they're declaring no income (I get the cap gains part, I don't get the mansions, parties, cars, food etc. Bit)
- GeneralTspoon 5y agoThey borrow money using their assets as collateral
- SilasX 5y ago... and then have to pay interest on top of the taxes for whatever they realize to pay it back (and the eventual “legit” realization)?
- GeneralTspoon 5y agoPotentially. But there’s also an inheritance loophole that allows them to avoid that: https://www.thebalance.com/how-the-stepped-up-basis-loophole-works-357485 https://www.thebalance.com/how-the-stepped-up-basis-loophole... Even without that loophole there are probably a bunch of tricks their financial planners have to minimise taxes (e.g. using trusts/charities, various tax free allowances). Or alternatively, because they essentially get to defer taxes for as long as they like (by refinancing the loan), it means they have the full tax free amount of cash available up front to buy more wealth generating assets.
- gruez 5y ago> Potentially. But there’s also an inheritance loophole that allows them to avoid that: https://www.thebalance.com/how-the-stepped-up-basis-loophole https://www.thebalance.com/how-the-stepped-up-basis-loophole... but you still pay the estate tax? Otherwise you get hit by the capital gains tax AND the estate tax.
- pitaj 5y agoIt's not necessarily that they're declaring no income, it's that their income is entirely composed of long term capital gains which are taxed at a lower rate than standard income tax.
- PaulDavisThe1st 5y agoThat's not actually the point of the ProPubica piece. The central point there is the treatement of unrealized capital gains.
- kcbigring 5y agoread the propublica article - it explains. or be lazy. loans ;) in particular low interest loans. as high interest loans would sort of ruin the plot and those are reserved for the working class.
- wmf 5y agoInterest rates aren't magic; secured loans have lower rates than unsecured.
- cycrutchfield 5y agoYour mortgage is a low interest loan. Should we tax your mortgage as income?
- lupire 5y agoYes, but deduct the house that the loan buys as an expense.
- imgabe 5y agoThen if you take a $500 million loan backed by your stock holdings to build a yacht, why not deduct the yacht as an expense?
- triceratops 5y agoThe house the mortgage paid for is taxed.
- cycrutchfield 5y agoI assume you're talking about property taxes, which is not really what we're talking about here.
- deleted 5y ago[deleted]
- jkhdigital 5y agoYou know Warren Buffett eats McDonald’s, right? A lavish personal lifestyle is not a requirement for being wealthy. But in general, I assume that most of the perks of that wealth are really attached to the ownership/management of the corporation that produced the wealth.
- nimih 5y agoYou raise an interesting point. On the other hand, Jeff Bezos is currently building a $0.5bn super-yacht.
- jonnycomputer 5y agoIt seems to me that quite a few things that we think of as lifestyle, can get written off as business expenses. Not that I know anything about this world.