3 ms·
> This is the law functioning as intended. Thiel's case is a one-in-100-million+ event. He may have the only Roth IRA in existence that's valued at over $5 bill
by tablespoon 5y ago
> This is the law functioning as intended. Thiel's case is a one-in-100-million+ event. He may have the only Roth IRA in existence that's valued at over $5 billion. But he didn't do it by exploiting some sort of "loophole" or paying high-priced accountants to shield his assets in foreign entities offshore. He put his investments in a Roth IRA just like any of you can do. The only difference is his investments were in the top 0.0001% in terms of performance. That's generally how people get to be billionaires.
No. Roth IRA's have contribution limits, and at a minimum I'm sure he exploited some loophole to get his adjusted gross income down below $110,000 so he could make that $2000 contribution in 1999 (https://www.irs.gov/pub/irs-prior/p590--1999.pdf https://www.irs.gov/pub/irs-prior/p590--1999.pdf). Look at his work history:
> https://en.wikipedia.org/wiki/Peter_Thiel https://en.wikipedia.org/wiki/Peter_Thiel: He then earned his J.D. from Stanford Law School in 1992.[7] After graduation, he worked as a judicial law clerk for Judge James Larry Edmondson of the U.S. Court of Appeals for the Eleventh Circuit, as a securities lawyer for Sullivan & Cromwell, as a speechwriter for former-U.S. Secretary of Education William Bennett, and as a derivatives trader at Credit Suisse. He founded Thiel Capital Management in 1996. He co-founded PayPal in 1999, serving as chief executive officer until its sale to eBay in 2002 for $1.5 billion.
- marris 5y agoHe could have saved it up from prior years of work. Starting salaries can in fact be lower than $110K.
- tablespoon 5y agoThe OP said he made the contribution in 1999, after he did things like work as a securities lawyer and founding a hedge fund.
- vmception 5y agoIts per year. Founders often are not taking salary or much of one for several years. You can have millions of liquid assets and not have any income and be eligible for income related thresholds. You dont need to be taking advantage of net operating losses or charitable deductions for any of this.
- hagy 5y agoI'm surprised to see this downvoted. My understanding is that one can only contribute to a Roth IRA if their income is below a certain limit. For the 2021 tax year that is $139k. Plenty of founders are receiving salaries below that threshold in 2021, even after raising money. If Thiel made this contribution for tax year 1998, then this would be before they even took any external funding. It's quite conceivable that he received an exceptionally low salary that year and relied on savings.
- tablespoon 5y ago> I'm surprised to see this downvoted. There was some snark that was edited out. > Plenty of founders are receiving salaries below that threshold in 2021, even after raising money. Yeah, that's the mechanism, but being in a position to decide what what your taxable income will be is a loophole in itself, one that's pretty much only available to the wealthy and people who run businesses. I'm sure Thiel was both at the time.
- vmception 5y ago> but being in a position to decide what what your taxable income will be is a loophole in itself mmmm not a loophole, the government encourages entrepreneurship and created tax deferred plans because social security is flawed and inadequate and pensions also shouldnt be expected by the general population Having a self directed IRA with some good trades in it is the expected outcome
- jeremy_k 5y agoIt's called Backdoor Roth Contribution [1]. It only really works if you don't have any normal IRA accounts. 1 - https://www.investopedia.com/terms/b/backdoor-roth-ira.asp https://www.investopedia.com/terms/b/backdoor-roth-ira.asp
- vitus 5y agoThe backdoor Roth didn't exist until 2010; Thiel's initial contributions were in 1999. https://en.wikipedia.org/wiki/Tax_Increase_Prevention_and_Reconciliation_Act_of_2005#Conversions_to_Roth_IRAs https://en.wikipedia.org/wiki/Tax_Increase_Prevention_and_Re...