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the ultra wealthy put all their assets into trusts or charities that dodge taxes and don't require selling anything. They can then take out loans using those as
by ren_engineer 3y ago
the ultra wealthy put all their assets into trusts or charities that dodge taxes and don't require selling anything. They can then take out loans using those assets as collateral when they need cash
- SkyBelow 3y agoAre they allowed to take out loans without paying them back? If they have to pay them back, eventually they have to use that collateral which will be a taxable event. They might be able to delay, but they'll eventually have to pay.
- mfitton 3y agoCould they not make sure that enough of their assets are in cash-flowing assets (think, rent-yielding assets, or treasuries, or dividend-yielding stock, etc.) that need not be sold and whose cash-flow can be utilized?
- twoodfin 3y agoAll those cash flows are taxed.
- deleted 3y ago[deleted]
- loeg 3y ago"Buy, Borrow, Die" is the talking point. Cost basis of the assets gets stepped up at death so the inheritor can pay off the loans at that point in time without paying taxes on capital gains.
- SkyBelow 3y agoThen this seems to be the loophole that needs to be resolved. Before the estate pays out, the debts should be settled within the estate using the cost basis belong to the deceased. Assets paid out after loans are satisfied should then have their cost basis reset (if that happens at all, I don't want to take a stance either way if that should happen, except it should only apply once loans are repaid if it ever does apply).
- loeg 3y agoMechanically, I don't think that works. What prevents the debt from attaching to the inheritor before death (e.g., co-signed loan)? The only solution here is eliminating the cost basis step-up at death.
- bluecalm 3y agoThey invest the loans and make even more money. No need to sell anything ever.