3 ms·
> This trick only works if you have the power to value stock low, like real low, buy it with your IRA then push it through the roof to get all the tax free prof
by refurb 3y ago
> This trick only works if you have the power to value stock low, like real low, buy it with your IRA then push it through the roof to get all the tax free profit
What do you mean "the power to value stock low"? The IRS rules require a fair market value. There is no way around this.
What actually happened was that this was an early investment round, where the company had little to no value, so the stock was assigned a nominal value of something like $0.00001/share, which happens with pretty much every startup when it first issues equity.
And what does "then push it through the roof to get all the tax free profits"? You mean grow a successful business? You just need to "push it through"?
- 2OEH8eoCRo0 3y agoHow do you determine fair market value for things not traded on a market?
- refurb 3y agoComparables, revenue multiples, discounted cash flow. There are multiple methods, none of them are perfect, but you can at least narrow it down. The IRS isn't stupid. You can't do your own valuation - well you can, but they'll reject it. Generally you'd hire at outside firm to do a valuation. If the IRS doesn't believe it, they'll come up with their own number and make you pay the taxes they think you owe. Thiel basically made a bet - early investor when the company made $0, hence the value of the shares was effectively zero. His investment was in the thousands of dollars. He just got lucky that it had a huge pay out.