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I don't understand why securing a loan with stock isn't considered a taxable event to begin with.
by anigbrowl 2y ago
I don't understand why securing a loan with stock isn't considered a taxable event to begin with.
- pjerem 2y agoI’m not rich enough to know but is it an official, written, securing or isn’t just the bank ok to emit the loan since they just trust you because they know you are rich ? Especially if the loan is just a fraction of your wealth and you have a good history, the bank would probably agree to grant you the loan without real guarantee.
- RhysU 2y agoIs securing a home equity loan a taxable event? Is securing a college loan? Is securing a car loan? What's different about the case for stock? The house, future earnings, and car are different sorts of collateral. If stock is different materially, then is margin trading a taxable event? Should municipalities incur income when they issue tax-backed bonds? Those tax-backed bonds have stock-like collateral. For all everyone loves to hate on borrow-die strategies, I have never seen anyone quantify the tax revenue "lost" to the "loophole". The actual loophole is the estate tax not applying to most people. Tax estates from $1 onward. That'll raise real funds and is arguably universally fair. Or, tax no estates which is also arguably fair. Either way reduces distortions in the tax code.