3 ms·

This bugbear has never made sense to me. Such a loan has to be paid back. With dollars. Presumably, from income that is taxed. And, with interest.

onlyrealcuzzo 3y ago
No. It's taxed as capital gains. Dividends are income. You pay 50% less federal tax.
- rvbissell 3y ago
  Either I'm missing your point, or you are missing mine. Any loans that the ultra-rich take out against their assets to fund their lifestyle, are going to have an associated interest rate, and a payment schedule. If they don't want to default, they'll need another source of funds to make those payments. IF that source of funds for load servicing is a salary, they'll be paying income tax (income) + interest payments (loan). IF that source of funds is dividends, then they may be cap-gains or income, depending on qualification status. In either case: there is.. * A limit to how much can be borrowed, before the loan payments outstrip the loan-funding income or qualifying dividends * In the case of income, they are still generating an income tax liability to service that loan, and also paying interest on top of it. Paying 124K/year for 10 years to pay off $1M at 4.5% means they fell into the 24% bracket for 10 years ($297.6K tax total) , rather than 37% in 1 year ($370K tax total). So while it does appear to create a tax savings -- even with the 4.5% loan interest -- funding life with loans is not the absolute "never have to pay income taxes" that my PP described it as. Clarifications / corrections welcome.
  - onlyrealcuzzo 3y ago
    You don't need to buy, borrow, die. A lot of people sell stock at capital gains, and get taxed at capital gains rates instead of income. You're making it more complicated than it is.
    - rvbissell 3y ago
      I agree with you, that one can live on cap-gains until the assets run out. I was replying to birdyrooster, who said > borrow against the value of their inflated shares and never have to pay income taxes ... which is not about selling stock.

onlyrealcuzzo 3y ago

No. It's taxed as capital gains. Dividends are income. You pay 50% less federal tax.

rvbissell 3y ago
Either I'm missing your point, or you are missing mine. Any loans that the ultra-rich take out against their assets to fund their lifestyle, are going to have an associated interest rate, and a payment schedule. If they don't want to default, they'll need another source of funds to make those payments. IF that source of funds for load servicing is a salary, they'll be paying income tax (income) + interest payments (loan). IF that source of funds is dividends, then they may be cap-gains or income, depending on qualification status. In either case: there is.. * A limit to how much can be borrowed, before the loan payments outstrip the loan-funding income or qualifying dividends * In the case of income, they are still generating an income tax liability to service that loan, and also paying interest on top of it. Paying 124K/year for 10 years to pay off $1M at 4.5% means they fell into the 24% bracket for 10 years ($297.6K tax total) , rather than 37% in 1 year ($370K tax total). So while it does appear to create a tax savings -- even with the 4.5% loan interest -- funding life with loans is not the absolute "never have to pay income taxes" that my PP described it as. Clarifications / corrections welcome.
- onlyrealcuzzo 3y ago
  You don't need to buy, borrow, die. A lot of people sell stock at capital gains, and get taxed at capital gains rates instead of income. You're making it more complicated than it is.
  - rvbissell 3y ago
    I agree with you, that one can live on cap-gains until the assets run out. I was replying to birdyrooster, who said > borrow against the value of their inflated shares and never have to pay income taxes ... which is not about selling stock.