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I didn't mention it because it's not true. I am amazed you think collateralized loans are just forgiven when someone dies. Remember that these are personal loan

by rsj_hn 5y ago

I didn't mention it because it's not true. I am amazed you think collateralized loans are just forgiven when someone dies. Remember that these are personal loans to Bezos. If they were loans to some business entity Bezos created, then whatever payment he received from that entity would be taxable income. The debts will need to be paid to the banks as part of the settlement process of Bezos' personal assets, which will require asset sales, and these sales will incur a tax liability and all of the above calculations will take effect.

patentatt 5y ago
And don’t you think that the bankers and heirs wouldn’t simply agree to have the heirs pay the loans back after they inherit the assets? Why wouldn’t they? I’d even assume it’s written into the loan documents or maybe even through the individuals will or something. And why wouldn’t an heir agree to that? By paying the loan after inheriting the assets the heirs will get to keep the capital gains. “Hey Bezos Jr., do you want to inherit 20% more money, or 20% less? Because all we have to do is sign this stack of papers in a different order to avoid all capital gains.” Or even simpler still is just to pay the loans back with the assets directly. Or any other number of maneuvers to make sure the bankers are happy and simply call the debt settled. There’s myriad ways of doing this, and I’m absolutely 100% sure that the billionaires and their ‘family offices’ of likely dozens or hundreds of highly skilled accountants and attorneys haven’t figured out some way out of this.
- rsj_hn 5y ago
  > And don’t you think that the bankers and heirs wouldn’t simply agree to have the heirs pay the loans back after they inherit the assets? OK, at this point you are just speculating wildly, right? You are inventing tax loopholes that don't exist, and when this is pointed out, more loopholes are invented which also don't exist. Point is, that's not how consumer lending, tax law, or inheritance law works. Those loans will be settled requiring asset sales at his death. If banks forgive a loan, that debt forgiveness is counted as income and is taxable. Actually it is likely they will be wound down before his death as he will want to reduce his personal asset holdings and put them in a trust, because the inheritance taxes on all of his wealth are much stricter than any income taxes. But reducing his asset holdings will require de-leveraging because loans against equity require quite a bit of collateral.
  - peterdn 5y ago
    > You are inventing tax loopholes that don't exist Are you aware of "step-up in basis" [1] that is widely considered a loophole around CGT for inherited assets? Any gains on assets up to the point they are inherited will not be subject to CGT. [1] https://www.investopedia.com/terms/s/stepupinbasis.asp#step-up-in-basis-as-a-tax-loophole https://www.investopedia.com/terms/s/stepupinbasis.asp#step-...
    - rsj_hn 5y ago
      So now we are in the weeds about inheritance tax, but the idea is that you pay 40% on your inheritance which clears your tax obligations for that inheritance and resets all the cost basis calculations, and then after that you pay gains when you sell from the time you inherited. That is not a tax loophole. E.g. if someone buys stock for $10, then the share price grows to $100 and they die, so that a family member receives $100 of stock, and then the share price goes up to $110 and the inheritor sells, then in the current system, the inheritor pays: $40 on receipt of shares at $100 (cost basis for him is zero) $4 on sale of shares at $110 (cost basis is now 100) for $44 in taxes paid on that stock. RSUs also work in the same way -- you pay taxes the moment you get them, and then if you keep them, when you sell your cost basis is the price of the shares when you were given them. That is important to know if you like to hold onto your RSU shares for a while -- know that your cost basis is not zero, but whatever the price of the shares were when you paid taxes for receiving them as income.
      - peterdn 5y ago
        > That is not a tax loophole. In your opinion. However, some people clearly believe it _is_ a tax loophole, presumably including those you're discussing with upthread. One of the talking points against inheritance tax is that it taxes the same money twice. If I'm a middle earner I pay taxes on my income, and I pay CGT when I dispose of assets to pay for my car or retirement or whatever. Taxes are then levied a second time on what's left when I die. People above are pointing out that, in contrast, extremely wealthy people manage to avoid the income/CGT part by borrowing against their assets tax-free and repaying the loans once they die and after the assets can be stepped up. So yes, inheritance tax may still be paid, but a great deal of their day-to-day income while alive is untaxed. Inheritance tax should be _in addition to_ income/CGT rather than instead of it, and part of the perceived injustice is that the ultra-wealthy get to dodge this in ways "ordinary" people can't. Based on that I personally would call it a loophole.
oblio 5y ago
The thing is, who freaking cares. He can literally go to his grave without paying taxes. That shouldn't happen. The average Joe can't do that. The average Joe shouldn't do that. Why should Bezos? Why are you even defending him? Your position is morally untenable.
- rsj_hn 5y ago
  >The thing is, who freaking cares. He can literally go to his grave without paying taxes. That shouldn't happen. So yes, you can borrow to pay taxes. And you can borrow to defer taxes. But that is limited by how many assets you have. Households across the country do something similar when they borrow to buy a house -- they do not pay taxes on the mortgage loan as if it was income. And, unlike Bezos, the mortgage interest paid by households is often tax deductible. But Bezos' loan does not deprive the government of taxes, because the rate on government borrowing is always going to be lower than the rate charged to Bezos. So if Bezos defers by 10 years, with the debts accruing at some rate r, then the government makes up for that by deficit spending with its debt accruing at a lower rate. Thus when these are settled, the government will make a profit. > Why are you even defending him? Your position is morally untenable. I guess the first mistake here is to try to view public policy from a "moral" perspective first and "not caring" about the details of what is actually happening. The second mistake is automatically decide who is good or evil based on some atavistic criteria and deciding the details don't matter if you are sufficiently outraged. Because at that point you've already lost. I suggest it's better to actually care and run the math before deciding whether something is good or bad for the Treasury. And questions about what is good or bad for the Treasury should be the ones you ask when determining tax policy, not whether you are really angry at a public figure or not. Bezos' motivation is not to pay fewer taxes across his lifetime, because he doesn't. It's that the interest rate he is charged is less than the rate of return on his stock. This has absolutely nothing to do with tax avoidance but exploiting spreads.

by rsj_hn 5y ago

patentatt 5y ago

And don’t you think that the bankers and heirs wouldn’t simply agree to have the heirs pay the loans back after they inherit the assets? Why wouldn’t they? I’d even assume it’s written into the loan documents or maybe even through the individuals will or something. And why wouldn’t an heir agree to that? By paying the loan after inheriting the assets the heirs will get to keep the capital gains. “Hey Bezos Jr., do you want to inherit 20% more money, or 20% less? Because all we have to do is sign this stack of papers in a different order to avoid all capital gains.” Or even simpler still is just to pay the loans back with the assets directly. Or any other number of maneuvers to make sure the bankers are happy and simply call the debt settled. There’s myriad ways of doing this, and I’m absolutely 100% sure that the billionaires and their ‘family offices’ of likely dozens or hundreds of highly skilled accountants and attorneys haven’t figured out some way out of this.

rsj_hn 5y ago
> And don’t you think that the bankers and heirs wouldn’t simply agree to have the heirs pay the loans back after they inherit the assets? OK, at this point you are just speculating wildly, right? You are inventing tax loopholes that don't exist, and when this is pointed out, more loopholes are invented which also don't exist. Point is, that's not how consumer lending, tax law, or inheritance law works. Those loans will be settled requiring asset sales at his death. If banks forgive a loan, that debt forgiveness is counted as income and is taxable. Actually it is likely they will be wound down before his death as he will want to reduce his personal asset holdings and put them in a trust, because the inheritance taxes on all of his wealth are much stricter than any income taxes. But reducing his asset holdings will require de-leveraging because loans against equity require quite a bit of collateral.
- peterdn 5y ago
  > You are inventing tax loopholes that don't exist Are you aware of "step-up in basis" [1] that is widely considered a loophole around CGT for inherited assets? Any gains on assets up to the point they are inherited will not be subject to CGT. [1] https://www.investopedia.com/terms/s/stepupinbasis.asp#step-up-in-basis-as-a-tax-loophole https://www.investopedia.com/terms/s/stepupinbasis.asp#step-...
  - rsj_hn 5y ago
    So now we are in the weeds about inheritance tax, but the idea is that you pay 40% on your inheritance which clears your tax obligations for that inheritance and resets all the cost basis calculations, and then after that you pay gains when you sell from the time you inherited. That is not a tax loophole. E.g. if someone buys stock for $10, then the share price grows to $100 and they die, so that a family member receives $100 of stock, and then the share price goes up to $110 and the inheritor sells, then in the current system, the inheritor pays: $40 on receipt of shares at $100 (cost basis for him is zero) $4 on sale of shares at $110 (cost basis is now 100) for $44 in taxes paid on that stock. RSUs also work in the same way -- you pay taxes the moment you get them, and then if you keep them, when you sell your cost basis is the price of the shares when you were given them. That is important to know if you like to hold onto your RSU shares for a while -- know that your cost basis is not zero, but whatever the price of the shares were when you paid taxes for receiving them as income.
    - peterdn 5y ago
      > That is not a tax loophole. In your opinion. However, some people clearly believe it _is_ a tax loophole, presumably including those you're discussing with upthread. One of the talking points against inheritance tax is that it taxes the same money twice. If I'm a middle earner I pay taxes on my income, and I pay CGT when I dispose of assets to pay for my car or retirement or whatever. Taxes are then levied a second time on what's left when I die. People above are pointing out that, in contrast, extremely wealthy people manage to avoid the income/CGT part by borrowing against their assets tax-free and repaying the loans once they die and after the assets can be stepped up. So yes, inheritance tax may still be paid, but a great deal of their day-to-day income while alive is untaxed. Inheritance tax should be _in addition to_ income/CGT rather than instead of it, and part of the perceived injustice is that the ultra-wealthy get to dodge this in ways "ordinary" people can't. Based on that I personally would call it a loophole.

oblio 5y ago

The thing is, who freaking cares. He can literally go to his grave without paying taxes. That shouldn't happen. The average Joe can't do that. The average Joe shouldn't do that. Why should Bezos? Why are you even defending him? Your position is morally untenable.

rsj_hn 5y ago
>The thing is, who freaking cares. He can literally go to his grave without paying taxes. That shouldn't happen. So yes, you can borrow to pay taxes. And you can borrow to defer taxes. But that is limited by how many assets you have. Households across the country do something similar when they borrow to buy a house -- they do not pay taxes on the mortgage loan as if it was income. And, unlike Bezos, the mortgage interest paid by households is often tax deductible. But Bezos' loan does not deprive the government of taxes, because the rate on government borrowing is always going to be lower than the rate charged to Bezos. So if Bezos defers by 10 years, with the debts accruing at some rate r, then the government makes up for that by deficit spending with its debt accruing at a lower rate. Thus when these are settled, the government will make a profit. > Why are you even defending him? Your position is morally untenable. I guess the first mistake here is to try to view public policy from a "moral" perspective first and "not caring" about the details of what is actually happening. The second mistake is automatically decide who is good or evil based on some atavistic criteria and deciding the details don't matter if you are sufficiently outraged. Because at that point you've already lost. I suggest it's better to actually care and run the math before deciding whether something is good or bad for the Treasury. And questions about what is good or bad for the Treasury should be the ones you ask when determining tax policy, not whether you are really angry at a public figure or not. Bezos' motivation is not to pay fewer taxes across his lifetime, because he doesn't. It's that the interest rate he is charged is less than the rate of return on his stock. This has absolutely nothing to do with tax avoidance but exploiting spreads.