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Peter Thiel’s $5B Roth IRA Tax Haven Is the Hottest New Investing Tip
- foolzcrow 5y agoLockdowns destroyed the common man where the f@#k were you? This is your focus while black people aren't allowed to own guns or have free speech in most places. Vice fell off.
- 908B64B197 5y agoPersonally, I stopped giving attention to Vice news after learning their founder was a white supremacist. [0] [0] https://en.wikipedia.org/wiki/Gavin_McInnes#Views https://en.wikipedia.org/wiki/Gavin_McInnes#Views
- justshowpost 5y agoI recommend Pravda.
- bpodgursky 5y agoDo you genuinely think these weird litmus tests about irrelevant history trivia accomplishes anything? Or between us, is this just a signaling thing.
- perl4ever 5y agoMy first reaction was maybe it's supposed to be satirical of what the commenter thinks "liberals" are like?
- lostcolony 5y agoHe was one of 3 founders of "Voice of Montreal" in 1994 and was bought out in 1996, when it was renamed Vice. That's...pretty freakin' distant a relationship to object to.
- 908B64B197 5y agoI don't know if he still has ownership. When in doubt, I'd rather not fund this.
- selimthegrim 5y agoI think he has been firmly dissociated in recent years, especially when he went on Fox or CNN and told one of the other panelists who happened to be female that she’d be much happier in the kitchen
- 908B64B197 5y agoThat still doesn't answer my questions. He might have nothing to say in the business, allegedly, but might still reap dividends from it.
- i_haz_rabies 5y agoYou're going to have to boycott a whole hell of a lot of businesses if that's the standard. Not saying you'd be wrong to do it, just... godspeed.
- peteretep 5y agoWikipedia has him leaving in 2008, what am I missing?
- chipotle_coyote 5y agoFrom the Wikipedia article on Vice, at least (and this is all linked to sources), the cofounders -- including McInnes -- bought it back in 2001, and he was actually with them until he left in 2008 due to "creative differences," which I (and others) read as Vice retooling themselves into a more serious news organization while McInnes was retooling himself into an alt-right leader. Having said that, though, Vice has a pretty clear political slant, and alt-right is definitely not it. So I'm in hard agreement with your conclusion -- I mean, if you object to white supremacist co-founders, Vice kicking theirs out and cutting ties with him would kinda be a net positive, right?
- rkho 5y agoShip of Theseus[1] [1] https://en.wikipedia.org/wiki/Ship_of_Theseus https://en.wikipedia.org/wiki/Ship_of_Theseus
- refurb 5y agoRoth IRA is now a “tax haven”. Sensationalist reporting.
- _8t4p 5y agoHave you not seen the reporting at Pro Publica? Manipulating a finacial instrument to avoid taxes strikes me as a prime example of a tax haven.
- trident5000 5y agoExcept you just get taxed up front with a roth. You still get taxed. You are at no greater advantage in growing your money after tax unless the tax code changes. (tax code change risk is the only reason people go with a roth). It just provides certainty.
- KODeKarnage 5y agoA tax haven is a nation with low to no taxes, where foreigners can operate for tax purposes. The term you are looking for, and almost had, was "tax avoidance". Tax avoidance is perfectly legal. It is tax evasion that is illegal.
- Retric 5y agoInvesting your Roth IRA in a company your the CEO of like Peter Thiel did is illegal, making this tax evasion. As to why it’s illegal, selling an arbitrary number of shares in your private company to yourself for 1$ then buying it back from yourself at say 1 billion dollars is normally legal. So, without such limits everyone could move unlimited money into a Roth IRA.
- vmception 5y agoThe IRS enforces that portion of the US Code, and they say its “executive && >10% owner”, not OR. Both conditions must be satisfied. and the penalties are also clear, up to 100% penalty of the value of the transaction if it isnt unwound Thiel could have paid that $2,000 and not unwound the transaction It is not possible for the court to hear any other perspective
- theogravity 5y agoHow does one exercise their employee stock options using their Roth IRA? Not finding any information on this.
- bpodgursky 5y agoThere's not going to be a standard workflow you can Google. This is super niche. Get in contact with your company's (hopefully it's a startup, so they're willing to be flexible) stock administrator and with the company you want to use for an IRA (you may need to hunt around to find one willing to jump through the hoops). May or may not find them to be willing, but you also won't know until you try.
- owyn 5y agoOpen a self directed IRA with a company like Pensco, fund it with cash and buy the options with a check issued from that account instead of a personal check. If the options are one cent per share and eventually are worth hundreds of dollars, you can avoid the capital gains tax. You can’t withdraw it until you retire though.
- koolba 5y ago> You can’t withdraw it until you retire though. You can withdraw the original principal tax free after five years and profits can be withdrawn at any time by paying income taxes and a 10% penalty. If you have any other assets it’d be stupid to withdraw it though. Tax-free accounts are the last one you want to draw from.
- fennecfoxen 5y agoIt probably goes something like this: 1. Contribute cash to the IRA. Use IRA cash to buy stock options from someone who holds those options (e.g. yourself). Ensure that you have real paperwork to back up the price that you're paying because if you don't the IRS is going to eat you alive!!! 2. Wait until options have value. 3. Contribute additional cash to IRA. 4. Use cash to exercise options. There might be a slightly different flow to contribute the options, consult someone who knows what they're doing.
- MuffinFlavored 5y agoReally not that exciting. tl;dr > Rather than dump his money into index funds or some other safe investment, Thiel spent $1,700 for 1.7 million shares of PayPal (a company he cofounded), at $.001 per share, inside his Roth. Within a year, the value of his PayPal shares skyrocketed from $1,664 to $3.8 million. Thiel then sold those shares (still within the Roth), meaning the value of his Roth became millions. Be at the right place at the right time and have everything work out in your favor, lol
- sakopov 5y agoIt looks like according to this source [1] placing stock options in a self-directed IRA violates tax code. This makes me wonder what kind of trickery was used to get this accomplished for Thiel. Granted, it's possible that the tax code was different than. ¯\_(ツ)_/¯ [1] https://sftaxcounsel.com/can-you-utilize-an-llc-to-hold-stock-options-in-a-self-directed-ira/ https://sftaxcounsel.com/can-you-utilize-an-llc-to-hold-stoc...
- vmception 5y agoWrong search string. IRAs simply cant have assets contributed to them, only USD cash. With that USD they can purchase anything. Additionally, stock options aren’t relevant here when it can also just buy shares directly, easy when you have executive authority over the company to sell shares. Thiel had under 10% ownership of PayPal quick enough that year to comply with regulations (he had 3.5% ownership in 2002 when it was sold) OR Thiel paid the penalty of $2,000 (100% penalty if transaction not undone) and didnt unwind the transaction, and still appreciated all the upside OR the IRS took too long to discover the issue to levy the $2,000 fine Doesn’t matter we don’t have the details, those are the possibilities and universe of consequences
- nrmitchi 5y ago> Thiel had under 10% ownership of PayPal quick enough that year to comply with regulations (he had 3.5% ownership in 2002 when it was sold) If you're arguing that these stock units were purchased when the "company" was created in 1998, then you're talking about Confinity (not "PayPal"), which only had 3 founders. Thiel was clearly a >10% shareholder at the time. Or are you trying to argue that Thiel had a 0% stake, because his IRA had all of his stake? You're using a 3.5% number from 3 years later, after merging with x.com, and raising ~$170M. > OR Thiel paid the penalty of $2,000 (100% penalty if transaction not undone) and didnt unwind the transaction, and still appreciated all the upside This is the biggest cop-out excuse of "valid". By this logic I can sell myself (into my Roth) all of my assets every year for $1, pay a $1 penalty, and everything is a-okay.
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- trdtaylor1 5y agoHot tip from Peter Thiel: Commit felony tax fraud, and do it big enough the IRS won't hold you accountable because you have more lawyers then they do.
- stevespang 5y agoLuv it . . . "because you have more lawyers than the IRS does . . . "
- vmception 5y agoyour lawyers can understand Congress’ laws better than the executive branch this isn’t controversial just reality
- trident5000 5y agoSomething people dont seem to understand: A roth IRA does not save you money unless the tax code changes unfavorably and at the time you exit the capital. The math of taking the tax cut upfront (and then compounding your investment within) vs taking the tax cut later (after compounding) is actually the same.
- deleted 5y ago[deleted]
- hn_throwaway_99 5y agoThis is laughably false, primarily because this is not just a discussion between a regular IRA (taxed on exit) or a Roth (taxed on entry). The contribution limits mean many people have a much larger amount of income than they could feasibly put into either type of account. I mean, just look at how Thiel did it, it's not like he was trying to decide how to stash $1700. He saw it specifically as a way where he could buy a large amount of his shares at basically nothing because he knew if it grew he'd have a large amount of tax free cash to play with.
- trident5000 5y agoIts not false its math. Get a spreadsheet out. He could have bought more shares without being taxed up front and the end result would be the same.
- nrmitchi 5y agoThis is completely wrong for a huge number of people who are currently in a much lower tax bracket than they expect to be in the future (when they are withdrawing).
- bpicolo 5y agoThe original Paypal folk were always big fans of this. Levchin did similar. https://www.forbes.com/sites/deborahljacobs/2012/03/20/how-facebook-billionaires-dodge-mega-millions-in-taxes/?sh=4f94296a58f3 https://www.forbes.com/sites/deborahljacobs/2012/03/20/how-f...
- bkjelden 5y ago> Thiel showed that you do not need to invest in index funds in a Roth IRA, which is what most people have been saying investors should do for a long time. The thing that is blowing the personal finance world’s minds is the idea that people can and perhaps even should be much more aggressive within their Roth IRAs in hopes of running into some stock that goes bananas, therefore giving you a personal, tax-free slush fund to invest in anything for the rest of your life. > “You want to put in [to a Roth IRA] highly undervalued assets that could grow massively in value,” Joshua Sheats, the host of the show, said on an episode that extensively praised Thiel’s strategy. So the "investing tip" is to gamble on wildly speculative investments rather than invest in index funds. Investing in highly undervalued assets - it's so simple, why didn't I think of that sooner!? This will make a few wildly rich, and many more will underperform the market. On average, everyone will do just as well as an index fund would've, because averaging is the entire point of index funds. I'd be way more interested in repeatable advice for how to turn $2000 into $5B than I am in how to avoid paying taxes on it.
- perl4ever 5y ago>So the "investing tip" is to gamble on wildly speculative investments rather than invest in index funds. Investing in highly undervalued assets - it's so simple, why didn't I think of that sooner!? I don't think that's as useless a tip as you make it sound. Suppose everybody invests in exactly the S&P 500. Nevertheless, each person can decide to hold the more speculative stocks in their Roth IRA and the others in a regular IRA, 401k, or taxable account. That doesn't require identifying the best investments, just the relatively volatile ones. So it seems like logical advice that is practical to implement, to me.