5 ms·

All you need to pull this off is ground-floor access to a unicorn startup. The IRA rules are the minor term here. Anyone could, provided they had an investment

by jwie 4y ago

All you need to pull this off is ground-floor access to a unicorn startup. The IRA rules are the minor term here. Anyone could, provided they had an investment that gained as much as Thiel’s, do this. Maybe there should be lifetime caps on tax protected withdrawals to prevent this kind of edge case, but that’s not how the laws were written. There are other ways for wealthy to dodge taxes. Invest, borrow, die works slightly worse since you’re paying loan interest instead of capital gains taxes. But it’s still not paying taxes. So yes, this is kind of interesting, but not that much more effective than the current tax dodging strategies.

jrochkind1 4y ago
Or just ban putting those kinds of investments into IRAs. "ground-floor access to a unicorn startup". Nobody that actually needs an IRA to fund a retirement has those kinds of vehicles in them (the vast majority don't have access to such if they wanted to), only really wealthy people using IRAs for a purpose they weren't intended for.
onetimeusename 4y ago
how is this done? I looked into the rules and you can't sell options or stocks from companies you have a controlling stake in into your own Roth. Friends and family can't either. I feel like you would have to be in a pretty special and unlikely situation to actually pull this off not even assuming the stock price actually increases much. I could be wrong about that.
- jwie 4y ago
  I believe you could open a Roth, put dollars in it and buy anything your Roth broker would sell you in that tax protected container. Exotic offerings are not going to be available to regular people, but if you could get access to bespoke financial product, like some exotic swap or derivative, or something else that would increase in value 1000000% or something else crazy, and you’re all set. There are specific restrictions to what can go in a Roth, but I think all financial products are allowed. You can’t put “a lottery ticket” in the IRA and win the lottery with that ticket and have it be tax protected, but only because it’s a physical object like a collectible. If you do it through stonks though it’s fine the ways the laws are written.
lr4444lr 4y ago
> Maybe there should be lifetime caps on tax protected withdrawals to prevent this kind of edge case, but that’s not how the laws were written. This is exactly how to solve this problem, but people would rather get angry at the rich for being rich than think sensibly about it.

by jwie 4y ago

jrochkind1 4y ago

Or just ban putting those kinds of investments into IRAs. "ground-floor access to a unicorn startup". Nobody that actually needs an IRA to fund a retirement has those kinds of vehicles in them (the vast majority don't have access to such if they wanted to), only really wealthy people using IRAs for a purpose they weren't intended for.

onetimeusename 4y ago

how is this done? I looked into the rules and you can't sell options or stocks from companies you have a controlling stake in into your own Roth. Friends and family can't either. I feel like you would have to be in a pretty special and unlikely situation to actually pull this off not even assuming the stock price actually increases much. I could be wrong about that.

jwie 4y ago
I believe you could open a Roth, put dollars in it and buy anything your Roth broker would sell you in that tax protected container. Exotic offerings are not going to be available to regular people, but if you could get access to bespoke financial product, like some exotic swap or derivative, or something else that would increase in value 1000000% or something else crazy, and you’re all set. There are specific restrictions to what can go in a Roth, but I think all financial products are allowed. You can’t put “a lottery ticket” in the IRA and win the lottery with that ticket and have it be tax protected, but only because it’s a physical object like a collectible. If you do it through stonks though it’s fine the ways the laws are written.

lr4444lr 4y ago

> Maybe there should be lifetime caps on tax protected withdrawals to prevent this kind of edge case, but that’s not how the laws were written. This is exactly how to solve this problem, but people would rather get angry at the rich for being rich than think sensibly about it.