3 ms·
At some point though the borrowed money needs to be repaid, and this would be with income (capital gains or earned income) that is taxed, right? So, I am curio
by holdenc 15y ago
At some point though the borrowed money needs to be repaid, and this would be with income (capital gains or earned income) that is taxed, right? So, I am curious how this works out in the long run. I imagine there is a twist to this I am missing...
- joshu 15y agoYeah, I'm trying to figure this out myself.
- citricsquid 15y agoHe only casually mentioned it (Twitter link here: https://twitter.com/#!/notch/status/110068027608932352 https://twitter.com/#!/notch/status/110068027608932352) so I too have absolutely no idea.
- jacques_chester 15y agoYou could presumably pay the loan off with shares. Since it was a loan, it's not income, so no income tax. IANATL, TINLA.
- holdenc 15y agoI am pretty sure that paying off a loan with the shares would mean that the shares had been sold in the eyes of the IRS. If not, this seem to be a pretty simple way to avoid paying capital gains on the shares of even small stock sales.
- jacques_chester 15y agoYou may be right. Hence IANATL.
- rayiner 15y agoYes, the tax is ultimately the same, modulo the time value of money. However, the idea of the realization requirement is that it's not reasonable to tax someone on a gain in the value of property when they don't have liquid assets to pay the tax, or when they haven't realized benefits from that appreciation. Taking a loan against those assets cuts against that, though. And the time value of money does make a difference. Say your stock appreciates $10 this year and stops appreciating. You will ultimately pay taxes on that $10 when you sell it, but if you can borrow against that money now, you can enjoy current benefits from that money while delaying the tax to years in the future when it is worth a lot less.