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Nowadays you get taxed because your mate lent you 1200 dollars through Venmo because you couldn't make the security deposit for the new overpriced apartment. (O

Nowadays you get taxed because your mate lent you 1200 dollars through Venmo because you couldn't make the security deposit for the new overpriced apartment. (Of course your mate will be taxed as well when you repay him.) But Jeff Bezos can borrow against stock that he owns. Income tax is completely meaningless when the 1%-ers have tax evasion strategies that Joe Citizen couldn't possible take advantage of.

modeless 5y ago
This is false in the US. Neither loans nor gifts of $1200 are taxed. Also, loans don't evade the capital gains tax, they merely delay it. Stepped-up basis is what evades the capital gains tax.
- HarryHirsch 5y ago
  Yes, when your friend says it's a loan and you treat it appropiately on your tax return it's not taxed. Else it will be. And if you can delay capital gains tax, great for you! How do I delay income tax?
  - modeless 5y ago
    Wrong. If it's not a loan then it's a gift and that's not taxed either for $1,200 as I mentioned. No need to even report it if it's under $16,000 per year.
    - HarryHirsch 5y ago
      Venmo will happily send you a 1099 form if it's above the 600 dollar threshold. We have Joe Biden to thank for that. It used to be higher.
      - oh_sigh 5y ago
        The 1099 is for sales of goods and services. Your friend loaning you $1200 is not a sale of a good or service.
      - vmception 5y ago
        A form doesn’t mean a tax is due It means a transaction was reported and that you better have a good story about why the tax isn’t due and why you didn’t report it on your own forms The people that are worried about the venmo 1099 are the people that have not been doing a lot more under the table (Not to invalidate the rest of the population that is just irrationally afraid of tax collectors)
        giantg2 5y ago
        I'm not sure that's true. They are only supposed to report on a 1099 if they know it's earned income, not just a transfer. If they're reporting mere transfers to the IRS, then that's a problem. That said, based on personal experience, I don't think Venmo is sending 1099s to everyone above that cumulative amount. I do believe they categorize transfers based on personal or commercial use. I expect a 1099 to be issued only for the commercial transfers.
        vmception 5y ago
        Transaction is the word I use, not transfer, just in case you mentioned transfer for some other reason. My reason is deliberate. Some kinds of transactions are tax events, others aren’t. Venmo has no way of knowing. Anybody doing automated 1099s has no way of knowing. 1099s just tell the IRS to look for a tax filing from the same tax ID that matches.
        giantg2 5y ago
        That's sort of my point. If they don't know, they don't have to file one. You only need to file one if it's taxable. And I think this is all moot since I believe they differentiate between business and personal transactions, right?
onlyrealcuzzo 5y ago
The 1% aren't borrowing against stock - or if they are - it's minimal and not worth discussion. 99% of the borrowing is coming from people worth close to a billion or more (0.001%).
- giantg2 5y ago
  I have no idea if this is how they do it, but I imagine they somehow "mortgage" their shares, then use the money as their own. Any interest you pay on investments is tax deductible, so that would reduce their tax burden. Not to mention, most of it isn't taxed since they aren't realizing those gains. Again, just me brainstorming loopholes.
  - vmception 5y ago
    You talk to an investment bank and ask You can borrow against anything, if someone is willing to lend Collateralized lending is the least constructive of all Make it worth their while
  - modeless 5y ago
    The interest is only tax deductible if you reinvest the money, which essentially means you can't use it. If you use it for living expenses, to buy a lambo, etc, then no deduction for you. Also, the loan must eventually be repaid, which means selling the assets and paying the taxes. Only if you carry the loan and pay the non-tax-deductible interest all the way until you die, then the capital gains taxes get erased by stepped-up basis and your heirs pay off the loans without paying capital gains tax. So stepped-up basis is the loophole, not the fact that you can take loans. Also, carrying ever-increasing loans (including loans to pay the interest on the previous loans) until you die means you pay a lot of interest! The "buy, borrow, die" strategy only works if you withdraw about 1% per year or less, otherwise the loan interest will catch up to you, and eventually you'll be at risk of losing everything to margin calls. Meanwhile if you withdraw normally without loans, then you can withdraw more like 4% per year indefinitely and have way more money to spend per year even after paying tax. So "buy, borrow, die" only works for huge fortunes where you didn't plan to withdraw more than 1% per year anyway. It's not something that most rich people are going to do. It severely limits your cash flow during your lifetime simply for the sake of saving taxes for your heirs. The people complaining about these loans have no idea how it actually works.
oh_sigh 5y ago
I'd encourage you to actually research how any of this works, because you are extremely misinformed and parroting the same lines that I see repeated verbatim around the internet by other misinformed people(ie "Bezos can just borrow against stock he owns and never pay any taxes!").
- giantg2 5y ago
  Do you have a link or can give a brief explanation? How the loans work that you say we don't understand?
  - oh_sigh 5y ago
    Not really, because I have no idea the extent of ignorance I'm dealing with. A simple question would be - how does the loan ever get paid off? A simple point would be that not paying taxes on loans is not some crazy loophole that only the rich have access to. Literally anyone who has ever taken out a mortgage for a house or a loan for a car has taken advantage of this - I'd guess at least 80% of adults in America have a car or home loan.
    - giantg2 5y ago
      How about a link then? It seems like you're trolling or otherwise violating the spirit of HN. I mean calling us all ignorant and uninformed, telling us that we're all wrong, then not explaining how we're wrong. In fact, your second comment conflicts with your prior one (claiming that Bezos can't borrow against stock to avoid taxes, then claiming that's exactly what people do).
      - oh_sigh 5y ago
        Here you go, enjoy: https://www.irs.gov/privacy-disclosure/tax-code-regulations-and-official-guidance https://www.irs.gov/privacy-disclosure/tax-code-regulations-... Who is "us all" I'm calling wrong? Are you part of a group of tax ignorant fellows with HarryHirsch? Is it a group of people who get their understanding of tax code from r/antiwork? Delaying taxes is not the same as avoiding or evading them.

modeless 5y ago

This is false in the US. Neither loans nor gifts of $1200 are taxed. Also, loans don't evade the capital gains tax, they merely delay it. Stepped-up basis is what evades the capital gains tax.

HarryHirsch 5y ago
Yes, when your friend says it's a loan and you treat it appropiately on your tax return it's not taxed. Else it will be. And if you can delay capital gains tax, great for you! How do I delay income tax?
- modeless 5y ago
  Wrong. If it's not a loan then it's a gift and that's not taxed either for $1,200 as I mentioned. No need to even report it if it's under $16,000 per year.
  - HarryHirsch 5y ago
    Venmo will happily send you a 1099 form if it's above the 600 dollar threshold. We have Joe Biden to thank for that. It used to be higher.
    - oh_sigh 5y ago
      The 1099 is for sales of goods and services. Your friend loaning you $1200 is not a sale of a good or service.
    - vmception 5y ago
      A form doesn’t mean a tax is due It means a transaction was reported and that you better have a good story about why the tax isn’t due and why you didn’t report it on your own forms The people that are worried about the venmo 1099 are the people that have not been doing a lot more under the table (Not to invalidate the rest of the population that is just irrationally afraid of tax collectors)
      - giantg2 5y ago
        I'm not sure that's true. They are only supposed to report on a 1099 if they know it's earned income, not just a transfer. If they're reporting mere transfers to the IRS, then that's a problem. That said, based on personal experience, I don't think Venmo is sending 1099s to everyone above that cumulative amount. I do believe they categorize transfers based on personal or commercial use. I expect a 1099 to be issued only for the commercial transfers.
        vmception 5y ago
        Transaction is the word I use, not transfer, just in case you mentioned transfer for some other reason. My reason is deliberate. Some kinds of transactions are tax events, others aren’t. Venmo has no way of knowing. Anybody doing automated 1099s has no way of knowing. 1099s just tell the IRS to look for a tax filing from the same tax ID that matches.
        giantg2 5y ago
        That's sort of my point. If they don't know, they don't have to file one. You only need to file one if it's taxable. And I think this is all moot since I believe they differentiate between business and personal transactions, right?

onlyrealcuzzo 5y ago

The 1% aren't borrowing against stock - or if they are - it's minimal and not worth discussion. 99% of the borrowing is coming from people worth close to a billion or more (0.001%).

giantg2 5y ago
I have no idea if this is how they do it, but I imagine they somehow "mortgage" their shares, then use the money as their own. Any interest you pay on investments is tax deductible, so that would reduce their tax burden. Not to mention, most of it isn't taxed since they aren't realizing those gains. Again, just me brainstorming loopholes.
- vmception 5y ago
  You talk to an investment bank and ask You can borrow against anything, if someone is willing to lend Collateralized lending is the least constructive of all Make it worth their while
- modeless 5y ago
  The interest is only tax deductible if you reinvest the money, which essentially means you can't use it. If you use it for living expenses, to buy a lambo, etc, then no deduction for you. Also, the loan must eventually be repaid, which means selling the assets and paying the taxes. Only if you carry the loan and pay the non-tax-deductible interest all the way until you die, then the capital gains taxes get erased by stepped-up basis and your heirs pay off the loans without paying capital gains tax. So stepped-up basis is the loophole, not the fact that you can take loans. Also, carrying ever-increasing loans (including loans to pay the interest on the previous loans) until you die means you pay a lot of interest! The "buy, borrow, die" strategy only works if you withdraw about 1% per year or less, otherwise the loan interest will catch up to you, and eventually you'll be at risk of losing everything to margin calls. Meanwhile if you withdraw normally without loans, then you can withdraw more like 4% per year indefinitely and have way more money to spend per year even after paying tax. So "buy, borrow, die" only works for huge fortunes where you didn't plan to withdraw more than 1% per year anyway. It's not something that most rich people are going to do. It severely limits your cash flow during your lifetime simply for the sake of saving taxes for your heirs. The people complaining about these loans have no idea how it actually works.

oh_sigh 5y ago

I'd encourage you to actually research how any of this works, because you are extremely misinformed and parroting the same lines that I see repeated verbatim around the internet by other misinformed people(ie "Bezos can just borrow against stock he owns and never pay any taxes!").

giantg2 5y ago
Do you have a link or can give a brief explanation? How the loans work that you say we don't understand?
- oh_sigh 5y ago
  Not really, because I have no idea the extent of ignorance I'm dealing with. A simple question would be - how does the loan ever get paid off? A simple point would be that not paying taxes on loans is not some crazy loophole that only the rich have access to. Literally anyone who has ever taken out a mortgage for a house or a loan for a car has taken advantage of this - I'd guess at least 80% of adults in America have a car or home loan.
  - giantg2 5y ago
    How about a link then? It seems like you're trolling or otherwise violating the spirit of HN. I mean calling us all ignorant and uninformed, telling us that we're all wrong, then not explaining how we're wrong. In fact, your second comment conflicts with your prior one (claiming that Bezos can't borrow against stock to avoid taxes, then claiming that's exactly what people do).
    - oh_sigh 5y ago
      Here you go, enjoy: https://www.irs.gov/privacy-disclosure/tax-code-regulations-and-official-guidance https://www.irs.gov/privacy-disclosure/tax-code-regulations-... Who is "us all" I'm calling wrong? Are you part of a group of tax ignorant fellows with HarryHirsch? Is it a group of people who get their understanding of tax code from r/antiwork? Delaying taxes is not the same as avoiding or evading them.