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The appreciation of the stock. Later you die, your stock is now worth $1000 of which your estate pays $0 tax on it (see: stepped up cost basis) and then they p

The appreciation of the stock. Later you die, your stock is now worth $1000 of which your estate pays $0 tax on it (see: stepped up cost basis) and then they pay off the loan and pass the proceeds to your trust. in the interim, you've been able to enjoy the $100 from your stock (which may have a cost basis if $0.0001 since you're a fonder) without paying any taxes. --- Also your interest rate of 10% is a bit high but still basically lower than the appreciation of stock so it kinda doesn't matter. https://tradethatswing.com/average-historical-stock-market-returns-for-sp-500-5-year-up-to-150-year-averages/ https://tradethatswing.com/average-historical-stock-market-r...

lordloki 2y ago
So your saying that these loans never get paid back in the lifetime of the borrower? And they just keep taking out more and more loans during their life? X
- lesuorac 2y ago
  > So your saying that these loans never get paid back in the lifetime of the borrower? Yes. > And they just keep taking out more and more loans during their life? X Well, I'm not making any claims on that but probably. If you took out a $200M loan and only needed to spend say $25M of that it's probably advantageous to re-invest $100M of that back into stocks and then if they appreciate (too much?) you'd want to do another loan again.
Gunax 2y ago
So if I am understanding this right, the inheritance gets its cost basis reset. If that's true, then I think we should be attacking the stepped up cost basis instead.
- lesuorac 2y ago
  I don't believe anybody has suggested attacking anything (in this thread). However, I would say the issue with attacking the stepped up cost basis is that it occurs ~50 years into the future. By taking out a loan the value of the stock has been realized for all intents and purposes except for tax. That should be considered the loophole imo (see article).

lordloki 2y ago

So your saying that these loans never get paid back in the lifetime of the borrower? And they just keep taking out more and more loans during their life? X

lesuorac 2y ago
> So your saying that these loans never get paid back in the lifetime of the borrower? Yes. > And they just keep taking out more and more loans during their life? X Well, I'm not making any claims on that but probably. If you took out a $200M loan and only needed to spend say $25M of that it's probably advantageous to re-invest $100M of that back into stocks and then if they appreciate (too much?) you'd want to do another loan again.

Gunax 2y ago

So if I am understanding this right, the inheritance gets its cost basis reset. If that's true, then I think we should be attacking the stepped up cost basis instead.

lesuorac 2y ago
I don't believe anybody has suggested attacking anything (in this thread). However, I would say the issue with attacking the stepped up cost basis is that it occurs ~50 years into the future. By taking out a loan the value of the stock has been realized for all intents and purposes except for tax. That should be considered the loophole imo (see article).