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Precisely. Was anyone else allowed to buy Paypal shares at 1/10 of a cent in 1999? If he alone marked this price, how would it not be fraudulent?
by bklyn11201 5y ago
Precisely. Was anyone else allowed to buy Paypal shares at 1/10 of a cent in 1999? If he alone marked this price, how would it not be fraudulent?
- jandrese 5y agoHe basically bought those shares from himself, which is why he was able to set the price arbitrarily low. The point of the Roth IRA is to encourage middle and lower class people to invest in their retirement by offering a tax incentive. But to avoid being abused by the rich the total yearly contribution limit is set very low. Thiel avoided this limit by simply selling himself a huge amount of stock for fractions of a penny on the dollar, knowing the actual price on the open market would be far higher. However, nobody can prove that the price of the private share would have been higher at the time because they weren't on a market. It would be like if you were trying to avoid taxes by selling your 1,000 acre mansion to a LLC that you own for $1 and paying the tax on that $1. This doesn't work for real estate, but the Roth IRA system is not as sophisticated so you can get away with it.