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>...The main loophole at the moment is the loan loophole: the rich get a loan against their unrealized gains. The last time this came up, it was a link to some

by opo 2y ago

>...The main loophole at the moment is the loan loophole: the rich get a loan against their unrealized gains. The last time this came up, it was a link to someone posting on reddit basically claiming they were a $2,500 per hour lawyer setting this up. The basic idea was that there were lenders giving multi-decade loans at a tiny interest rate (only payable upon death with also sharing a % share of the gains). Maybe there are lenders who don't understand the time value of money, but no one has actually provided any statistics showing this is actually a common loophole. According to this: https://finance.yahoo.com/news/jeff-bezos-sell-5-billion-185303024.html https://finance.yahoo.com/news/jeff-bezos-sell-5-billion-185... Bezos has sold around $13.4 billion in stock in 2024. If he could easily avoid millions (maybe billions) of dollars of capital gains tax by this one simple trick, why didn't he?

modeless 2y ago
The truth is that if you expect to live more than a few years and you spend more than ~1% of your wealth per year, you can't use the buy-borrow-die strategy. The loan interest will eat you alive long before you die. Compounding works against you here. (You can't just charge 0% interest either, the IRS thought of that and they set minimum rates.) If you just pay capital gains instead, you can spend a lot more before you die. And what good is money you can't spend before you die? Buy-borrow-die only makes sense if you are super wealthy (like $100m+) and don't want to touch the money while you are alive, but you want to maximize how much you pass on to your family after you die (when stepped-up basis kicks in to erase the capital gains tax). It's way overblown; it's really not something most rich people are going to do. But I would be in favor of eliminating stepped-up basis on death to get rid of it.
HDThoreaun 2y ago
Bezos is afaik the only big tech founder who actually sells stock. It's public knowledge when insiders sell stock and as far as I can see Bezos is the only one who does so consistently.

by opo 2y ago

modeless 2y ago

The truth is that if you expect to live more than a few years and you spend more than ~1% of your wealth per year, you can't use the buy-borrow-die strategy. The loan interest will eat you alive long before you die. Compounding works against you here. (You can't just charge 0% interest either, the IRS thought of that and they set minimum rates.) If you just pay capital gains instead, you can spend a lot more before you die. And what good is money you can't spend before you die? Buy-borrow-die only makes sense if you are super wealthy (like $100m+) and don't want to touch the money while you are alive, but you want to maximize how much you pass on to your family after you die (when stepped-up basis kicks in to erase the capital gains tax). It's way overblown; it's really not something most rich people are going to do. But I would be in favor of eliminating stepped-up basis on death to get rid of it.

HDThoreaun 2y ago

Bezos is afaik the only big tech founder who actually sells stock. It's public knowledge when insiders sell stock and as far as I can see Bezos is the only one who does so consistently.