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This isn't an infinite money cheat. You eventually have to settle the debt. The only way to do that is with income.
by missedthecue 4y ago
This isn't an infinite money cheat. You eventually have to settle the debt. The only way to do that is with income.
- yellowapple 4y agoWhich can happen by liquidating assets. As long as your net worth grows faster than your debt, this is absolutely an infinite money cheat.
- missedthecue 4y agoOK... liquidating assets is a taxable event. You aren't avoiding the taxman by borrowing money.
- jjeaff 4y agoIf you can hold off on liquidating assets until death, your estate will pay no capital gains when it liquidates due to the step up rule.
- kortilla 4y agoThat’s not an infinite money cheat when the required input is infinite wealth growth.
- slg 4y agoThere is obviously an upward limit on the debt they can acquire. The problem isn’t that this is an infinite money cheat. It is a tax avoidance cheat because now the income is all long term capital gains that can be realized whenever is most convenient and gains can be offset by losses. That is how these people have tax rates below 5%.
- missedthecue 4y agoThere is a $3000 cap on capital gains loss offsets. Useful for the middle class, but useless if you're Jeff Bezos.
- slg 4y agoYou are misremembering the details of that cap. The $3k cap is for offsetting ordinary income. These people have little ordinary income. Almost all of their money would be from capital gains. A $1b capital loss can be used to completely offset a $1b capital gain and leave a tax bill of $0.
- RhysU 4y agoRight. Because the tax due on $0 net is $0.
- HWR_14 4y agoYou never have to settle the debt. You die with the debt and the assets and your estate settles the debt then passes the rest in to your heirs
- lesuorac 4y agoTo piggy back on this a bit, there's something cost step-up cost basis and so while you pay have bought stock at 1$ and it appreciated to 100$ your estate's cost basis will be 100$ so there is 0 capital gains. Which means that the loan can be paid off without paying any capital gains tax.
- missedthecue 4y agoheirs don't inherit debt. Your debt will be settled by the estate which will pay the tax. What's left will be passed down to your children/heirs.
- jjeaff 4y agoThe step up basis rule applies to the estate and it is stepped up to the current value on the date of death. So the estate settles the debt and pays no capital gains tax on any assets that had to be sold to pay off the debt. Then, the remaining assets go to the heirs. Or, if it is setup like most super wealthy, the assets left in the estate will more or less be cancelled out leaving little in the estate thus avoiding estate tax. Most of the assets will have already been passed along or will remain in various trusts and non-profits for the benefit of the heirs.
- missedthecue 4y agoOnly counts for estates less than $11.2 million. Again, useful for the middles class. Meaningless if you're Bezos.
- jjeaff 4y agoNo, I don't believe there is a limit for the step up rule. You are thinking of the estate tax exemption. That is avoided through other loopholes.